Question: A company manufactures three products using the same production process. The costs incurred up to the split-off point are $232,000. These costs are allocated to
A company manufactures three products using the same production process. The costs incurred up to the split-off point are $232,000. These costs are allocated to the products on the basis of their sales value at the split-off point. The number of units produced, the selling prices per unit of the three products at the split-off point and after further processing, and the additional processing costs are as follow:
| Product | Number of Units Produced | Selling Price at Split-off | Selling Price after Processing | Additional Processing Costs | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| X | 5,800 | $12.00 | $17.00 | $16,240 | |||||||||
| Y | 11,600 | 12.20 | 16.80 | 24,360 | |||||||||
| Z | 4,640 | 20.00 | 22.20 | 13,920 | |||||||||
Which product(s) should be processed further and which should be sold at the split-off point?
Products X&Y should be processed further but Product Z should be sold at the splitoff point.
(b) Would your decision be different if the company was using the quantity of output to allocate joint costs?
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts